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Mexico and the US are top trading partners

Mexico and the US are top trading partners

As of the first four months of 2019, Mexico and the US are top trading partners. Canada and China follow Mexico in terms of the total volume of trade with the United States.

Despite that fact that the United States-Mexico-Canada Free Trade Agreement has yet to be ratified by both houses of the US Congress, Mexico and the US are top trading partners.  This set of circumstances is, in part, due to the continuing trade war between the United States and China.  As a result of the commercial spat between the US and the Asian economic powerhouse, Mexico has gained a greater share of the US market compared to the advances that have been made by Canada.   From January to April of 2019, trade in products (imports and exports) between Mexico and the United States totaled more than US $203 billion, while total trade between Canada and the US stood at US $198.6 billion. 

Conversely, China’s total merchandise trade with the United States during the first four months of the present year stood at US $174.6 billion.  Growth in bilateral commerce between the US and China has expanded steadily and exponentially over the past two decades.  This has been the case so much that in 2018 the Far East nation led all other countries in its trade with the United States.  In 2019, however, Juan Antonio Dorantes, foreign trade specialist at the Aguilera & Loera Law Firm, has noted that Mexico’s trade with the US market has become consolidated by comparative advantages, such as geography, labor, and diversity of goods and services that have replaced imports that have previously been imported by the United States from China.  He also noted that the ongoing commercial disagreement with China is another reason why Mexico and the US are top trading partners.

Due concerns with China’s trade policies in the areas of intellectual property, technology transfer, and innovation, the administration of US President Donald Trump has implemented three rounds of tariff increases that affected US $250 billion dollars of Chinese products.  The Chinese government, headed by the General Secretary of the Communist Party, Xi Jinping, responded by levying a total of US $100 billion on the import of certain US made products.  In addition to these moves President Trump ordered the US Trade Representative (USTR) to begin the process of increasing tariffs to twenty-five percent on almost all of the US $300 billion remaining goods imported to the United States from China.  Items such as rare earth materials, rare earth products, pharmaceuticals and pharmaceutical supplies and certain medical products were exempted from tariffs, however.  As a counter to this move, China imposed ten to twenty percent tariffs on a total of 5,410 products originating in the United States that have a total value of approximately US $60 billion.

Juan Antonio Dorantes has stressed, however, that despite the levy of tariffs across a broad range of goods, China has been able to maintain some of its export competitiveness in the US market. 

From another angle, Jose Gerardo Traslosheros Hernandez, Mexico’s former ambassador to New Zealand and ex-negotiator of the Mexico-Japan Economic Partnership Agreement has stressed that the fact that Mexico and the US are top trading partners has come at a cost.  Although Mexico has evaded US tariffs on its products and gained market share by agreeing to assist the United States with problematic immigration issues on its southern border, the threat of tariffs still exists.  Any taxes imposed by the US government on the importation of goods from Mexico could have a negative impact on the latter’s efforts to attract capital investment.

In addition to trade troubles with China, another reason that the US and Mexico are top trading partners can be attributed to specialization.  Specialization increases as manufacturing and assembly plants in Mexico continually increase their efforts to take advantages of economies of scale.  As a result of this, supply chains have been increasingly crossing national borders as manufacturing work is done where it is most efficient. 

 

 

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